Case Law Details
Icomm Tele Ltd Vs Commissioner of Central Tax (CESTAT Hyderabad)
Introduction: A recent case, Icomm Tele Ltd vs. Commissioner of Central Tax, came before the Central Excise and Service Tax Appellate Tribunal (CESTAT) Hyderabad, raising an essential legal question. The central issue was whether tax claims by the government could be extinguished following the approval of a resolution plan by the National Company Law Tribunal (NCLT).
Background: The case involved Icomm Tele Ltd, which faced financial difficulties and had a creditor initiate proceedings under the Insolvency and Bankruptcy Code (IBC) to recover debts. The NCLT Hyderabad initiated the Corporate Insolvency Resolution Process (CIRP) for the company, and a Resolution Plan was proposed.
Resolution Plan Approval: The Resolution Plan was presented for approval by the Committee of Creditors and received the NCLT’s approval on June 29, 2019. According to the Resolution Plan, all debts of the company would be settled upon compliance with the payment schedules outlined. Notably, Clause 7.4 of the Resolution Plan stated that all proceedings against the company related to any period before October 17, 2019, would be extinguished as of that date. Furthermore, Clause 1(f) in Chapter X of the Resolution Plan stated that all government tax claims related to periods before the NCLT approval date would also be extinguished. Clause 1(o) declared that any tax, duty, and legal liability for the period before the approval date would be waived and extinguished.
Appeal and Resolution Plan: The appeal in question was filed in 2012 and was considered a claim that existed before the NCLT’s approval date. The payment schedules outlined in the Resolution Plan had been fulfilled, effectively settling the dispute that formed the basis of the appeal.
NCLT’s Order: Upon reviewing the NCLT’s order dated October 17, 2019, the CESTAT noted that the NCLT had approved the Resolution Plan. The order stated that the Resolution Plan met the legal requirements, including those under the I&B Code, and was not in contravention of Sec 29A. It declared the Resolution Plan binding on the corporate debtor, its employees, members, creditors, including the Central Government, and other stakeholders involved in the Resolution Plan.
CESTAT’s Decision: Taking into account the NCLT’s approval of the Resolution Plan in the insolvency proceedings, the CESTAT ruled that the appeal no longer had merit. Consequently, the appeal was dismissed.
Conclusion: The case of Icomm Tele Ltd vs. Commissioner of Central Tax before CESTAT Hyderabad underscores the impact of a resolution plan approved by the NCLT on tax claims by the government. The CESTAT held that once the Resolution Plan was approved, all tax claims related to periods before the approval date were extinguished. This decision sets a precedent for resolving similar disputes following the approval of resolution plans in insolvency proceedings, ultimately providing clarity and closure to such matters.
FULL TEXT OF THE CESTAT HYDERABAD ORDER
Heard the learned AR and perused the records.
2. We find that the company faced financial difficulties and an application was filed by one of the financial creditors under Sec 7 of Insolvency and Bankruptcy Code (IBC), 2016 for recovering debts owned by the company. The Hyderabad Bench of the NCLT issued Order dated 17.10.2019 for initiating Corporate Insolvency Resolution Process (CIRP) in regard to the company under Sec 13 of IBC. Accordingly, a Resolution Plan was floated by the Resolution Professional for approval of the Committee of Creditors. The same was approved on 29.06.2019. The Resolution Plan was submitted before NCLT as required under Sec 30(6) of the IBC. It was approved by NCLT vide Order dated 17.10.2019 and the Resolution Plan is effective from the NCLT Approval Date.
3. The Resolution Plan provided that all debts of the company would be fully and finally settled, upon due compliance with the payment schedules, stipulated therein. As per clause 7.4 of Chapter IV of the Resolution Plan, all proceedings against the company in relation to any period prior to 17.10.2019, whether forming part of admitted claims or not, shall stand extinguished by virtue of Order dated 17.10.2019. Clause 1(f) in Chapter X of the Resolution Plan states that all claims prior to the NCLT approval date of Governmental Authorities in relation to all taxes which the Appellant was liable to pay shall stand extinguished on the approval date. Clause 1(o) declares that any tax, duty and legal liability for the period prior to approval date will be waived and extinguished. That the instant Appeal filed in 2012 is a claim which existed prior to approval date and stands extinguished by virtue of Resolution Plan. The payment schedules described in the Resolution Plan have been completed. The dispute underlying in the above appeal stands settled under Resolution Plan and nothing survives. It was prayed that appeal may be heard out of turn to record the approval of Resolution Plan by NCLT and the appeal may be disposed accordingly.
4. On perusal of the copy of the Order of NCLT, Hyderabad dated 17.10.2019, it is seen that the NCLT has approved the Resolution Plan. Para 34 reads as follows:
“In view of the foregoing discussion, the ‘Resolution Plan’ filed with the application meets the requirement of section 30(2) of the I&B Code, 2016 and Regulations 37, 38, 38(1A) and 39(4) of IBBI (CIRP) Regulations, 2016. The ‘Resolution Plan’ is also not in contravention of any of the provisions of Sec 29A. Hence, this adjudicating authority is satisfied that the Resolution Plan is in accordance with law. Therefore, the ‘Resolution Plan’ annexed with Application bearing IA No. 577 of 2019 filed in CP (IB) 462/7/HDB/2018 is hereby approved and forms part of this Order. The said Resolution Plan shall be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government; any state Government or any Local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the Resolution Plan including Resolution Applicant in terms of provisions of Sec 31(1) of the Code.”
5. Taking note of the fact that the NCLT has approved the Resolution Plan in the insolvency proceedings in regard to the company, we are of the view that the Appeal does not survive any more. Accordingly, the Appeal is dismissed.
(Dictated and pronounced in the Open Court)
